Japanese OEMs aim to continue record-breaking profits in FY 2016

Despite expected slowdown in growth, OEMs maintain aggressive sales plans

2015/06/03

Summary
Ten Japanese OEMs' FY 2016 financial results set to make new records
Unit sales in North America remain strong, sales in Japan decrease
Currency exchange loss predicted to reduce operating profit in FY 2016
Record-breaking spending planned for capital investments and R&D in FY 2016
Sales Forecast by LMC Automotive: Japan Light Vehicle sales will be 4.36 million units in 2018
Statistics on Japanese OEMs' FY 2015 financial statements/ FY 2016 targets
Statistics on Japanese OEMs' FY 2015 financial statements/ FY 2016 targets(2)

Summary

Ten Japanese OEMs' Consolidated Sales Total financial results of ten Japanese OEMs set new records in the fiscal year ended in March 2015 (FY 2015: Nissan, Mitsubishi, and Suzuki uses "FY 2014" to refer to the same term. In this report, MarkLines uses "FY 2015" to refer to the term, following the term choice by many OEMs); consolidated sales were up 7.2% year-over-year (y/y), operating profit was up 12.6% y/y, and net profit increased 12.9% y/y. However, the rate of growth declined compared to that of FY 2013 and FY 2014. While the OEMs have targeted setting new records in FY 2016 as well, the y/y rates of growth are predicted to decline even further. They are aiming for a 4.4% increase in sales, a 4.6% increase in operating profit, and a 3.8% increase in net profit.

Contrasts can be seen in performance by region. On one hand, the North American market is expected to remain strong and the European market will see continued improvement. On the other hand, the Japanese market is forecast to shrink. In addition, the OEMs are concerned about lower performance in emerging countries (mainly in Asia), as the Chinese market is forecast to slowdown, and the recoveries in the Thai and Indonesian markets are slower than expected. Nevertheless, the Japanese OEMs have announced aggressive sales plans for Asia and other emerging markets, where they target selling 491,000 units more, which will be a 4.8% increase y/y.

While favorable currency exchange gains increased operating profits in FY 2014 and FY 2015, operating profits are expected to be JPY 165.3 billion lower in FY 2016, as a result of lower valuations of emerging-countries' currencies.

Under these circumstances, Japanese OEMs which have improved their profitability, plan to spend record amounts in capital investments (JPY 3.06 trillion) and R&D (JPY 2.82 trillion) in FY 2016 to enhance their competitive strength. Toyota Motor Corporation, which had postponed plans to build new production plants for three years, announced in April 2015 that it would build new plants in China and Mexico.

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